It's been a wild week for solar stocks, driven by an earnings season that's seen everything from blowouts to complete duds. The following chart shows how some of the major newsmakers shook out -- in some cases, even those bouncing back later in the week ended down.
FSLR Total Return Price data by YCharts
I'll cover the major earnings news of the week and what investors should take away as earnings season moves forward.
Chinese earnings pick up steam
Chinese manufacturers began announcing preliminary results, and they're beginning to improve. Trina Solar (NYSE: TSL) said shipments would be 630 MW to 660 MW, which was 130 MW above previous guidance. Gross margin of 11% to 12% was also well above the middle single guidance given last quarter.
Yingli Green Energy (NYSE: YGE) saw similar improvement, with increasing gross margin in a range of 11% to 12%, and said shipments will grow 23% to 24% sequentially, from a previous guidance of percentage growth in the low to mid-teens.
Trina and Yingli offered guidance figures, and we still don't know what the bottom line looked like, but Canadian Solar (CSIQ +2.28%) did report its earnings for the quarter, seeing similar results. The company shipped 455 MW, generated a gross margin of 12.8%, and lost $12.6 million, or $0.29 per share.
Conditions are clearly improving in the Chinese manufacturer market as seen by improving margins across the board and higher shipments. What these companies aren't reporting is a profit at this point. If Chinese demand picks up, margins improve in Europe, and Japan continues to have high sales prices, then we may see companies with low debt loads come close to a profit later this year.
First Solar and SunEdison report duds
The big losers of the week were First Solar (FSLR 0.13%) and SunEdison (SUNE +0.00%), which reported disappointing earnings. First Solar's results show a particularly sharp decline in demand despite the solar industry's strength this year. The company's pipeline of solar projects is down so far this year, and with little to no demand outside its systems business, earnings are falling. To make matters worse, cost per watt of $0.67 is similar to the sale price of some Chinese modules, but instead of an increasing utilization rate we saw at Trina, Yingli, and Canadian Solar, First Solar's utilization is falling.
SunEdison saw an increased backlog of projects, but its wafer business is struggling to make money in a highly competitive solar supply market. Sales and margins were down dramatically from a year ago, and the company swung to a loss of $0.19 per share. The eventual shift to being primarily a project builder should be a good strategic move, but it was a tough transitional quarter, and investors had no patience for earnings misses this week.
Foolish bottom line
Over the next few weeks we'll get more detail on how companies did in the second quarter, particularly in China. Trina Solar reports on Aug. 20, and Yingli follows on Aug. 30, with smaller companies scattered throughout the back half of the month. Look for increasing margins, debt levels, and third-quarter guidance to paint the picture of how solar companies will perform in the second half of 2013.
Overall, the solar industry is doing well, but there will still be companies that fail and companies that win a disproportionate amount of business. The upside for winners is huge, but as this week showed, there's still a lot of risk in solar stocks.
